9911796707
TMI Blog2017 (8) TMI 1062X X X X Extracts X X X X X X X X Extracts X X X X ..... raises common issue concerning computation of the income arising from activities of accommodation entries provided by the assessee to various entities and to bring it to tax within the provisions of the Income-tax Act,1961 (Hereinafter called "the Act"), for assessment years 2004-05 to 2010-11. 3. First we shall take up cross appeals for assessment year 2004-05. The assessee's appeal for assessment year 2004-05 is ITA no.4913/Mum/2013 while Revenue's appeal is ITA no. 4712/Mum/2013. 4. The brief facts of the case are that search and seizure operations u/s 132(1) of the 1961 Act were carried out by Revenue at the residence and business premises of M/s Orbit Corporation Limited Group on 11.02.2010 by ADIT(Inv.), Unit -VII(4), Mumbai. During search operations, unaccounted cash/jewellery and incriminating documents were found and accordingly appropriate assets/documents were seized. Based on these seizures during search action u/s 132(1), the Managing Director of the Group concern namely the flagship company M/s Orbit Corporation Limited, Sh. Pujit Ravikiran Aggarwal offered undisclosed income to the tune of Rs. 71,81,90,065/- arising out of these seized incriminating material towar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o question no 5 wherein it is stated that when any party contacts assessee for bills, he issues bills to them and collect cheques from them which is deposited in assessee's bank account which is withdrawn in cash and given back to the party after deducting his commission in the range of 0.30-0.40%. Similarly for cheque discounting, it was submitted that cash was given in lieu of cheque for which the assessee charged commission in the range of 0.30- 0.40%. It was submitted that no commission was received at the time of issuance of bills but the same was received when cheque received against bills is discounted in the bank. It was submitted that only sale bills which were in the nature of purchase accommodation bills for the opposite parties were issued by the assessee. The assessee reconfirmed the names of various concerns which were used for issuing bogus bills which were stated to be the same concerns which names were given by the assessee to Revenue on 13-12- 2007 at the time of survey u/s 133A conducted by Revenue against the assessee. The assessee also confirmed that bank accounts with ABN Amro Bank, Nariman Point A/c no 1093238, Standard Chartered Bank, Chowpathy and HDFC Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for assessment year 2005-06, We have observed that similar facts were there before the AO as were there before the AO for AY 2004-05 and the AO confirmed additions to the tune of Rs. 46,62,057/- as income of the assessee for the assessment year 2005-06 based on the average income of the assessee for succeeding three years from the issuance of accommodation bills, vide assessment order dated 30-12-2011 passed by the AO u/s 153C r.w.s. 144 of the 1961 Act. 6. Now we will take up issues for assessment year 2006-07, 2007-08 and 2008-09, The factual matrix for assessment year 2006-07, 2007-08 and 2008-09 is discussed in preceding para's of this order while discussing for AY 2004-05. We have observed that the AO made additions to the income of the assessee to the tune of 1% of aggregate of accommodation bills issued plus payments received by the assessee to the tune of Rs. 3,19,59,278/- for AY 2006-07( Rs. 28,67,74,365/- for AY 2007-08 and Rs. 107,98,83,731/- for AY 2008-09). The assessee claimed that only payment received against bills issued should be taken for computation of commission income. It was observed by the AO that once the bill is issued by the assessee, the beneficiary w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me has not been granted by the AO to produce bank statements and other details and hence principles of natural justice was violated. The assessee was given an opportunity again to file all details during appellate proceedings by learned CIT(A) as well during remand proceedings by the AO to produce all bank statements as well other supporting documents to show that the assessee was not involved in the issuance of bogus bills during the impugned assessment year and hence it was held that the grievance of the assessee that principles of natural justice are breached stood satisfied as now adequate opportunity stood granted during appellate and remand proceedings, while adjudicating appeal by learned CIT(A) as held by learned CIT(A) in its appellate order. During appellate proceedings before learned CIT(A), it was argued by the assessee that in the discounting of cheque business, commission is paid on cheque deposited in bank and cash is given back to party after deducting commission @0.30-0.40% and therefore estimation of income @1% on the bill issued plus cheque received as was done by AO is not justifiable and it was contended that the assessee receives commission only on cheques re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk and in similar cases, the other businessmen have reported income to be 0.30-0.40%. The AO submitted remand report wherein contents of the assessment order were reproduced by the AO. The assessee on its part in reply to remand report in rejoinder reiterated its submissions before learned CIT(A). The learned CIT(A) issued enhancement notice to the assessee as to explain why commission income be not assessed at 2% of the gross receipts. The assessee reiterated that the assessee receives cross bearer cheques which are deposited in bank and cash is withdrawn and returned to the party after deducting commission of 0.30-0.40% earned by the assessee. It was submitted that all the bank accounts are in the name of Sh. Prabhuram Purohit and the assessee has never issued any accommodation bills in its name and discounting of cheques varies from 0.30-0.40%. The AO has also submitted before learned CIT(A) in its second report dated 13-02-2013 that the assessee had a bank account with Standard Chartered Bank A/c No. 22505490249 wherein there were transactions as under, which were found : F.Y. Total Deposit Total Withdrawal 2003-04 34,93,927 29,54,427 2004-05 2,09,728 2,57,600 2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he commission earned was only to the extent of 0.30-0.40%. It was also observed by learned CIT(A) that the evidences of providing accommodation bills by the assessee to the Orbit Group were considered and the following facts had emerged from the search and seizure proceedings conducted in the case of Orbit Group: (i) The assessee only issues accommodation bills and no material / services have ever been supplied / rendered. (ii) The assessee issued accommodation bills in name of various parties namely Perfect Steel Industries, M/s Kiran Sales Corporation, Shiv Shakti Enterprises, Rishab Enterprises, Impex Sales Corporation, Mahalaxmi Traders, Mittals Trading Co., Essar Trading Engg. Co., Vikas Trading & Engg. Co., Sagar Enterprises, Akash Tubes (India), Santosh Metal and Tubes etc controlled by the assessee. (iii) The assessee had employed Sh Prabhuram B. Purohit in whose name assessee operated an entity called M/s Perfect Steel Industries Similarly, other benami's were used in issuing accommodation sales bills (purchase bills in the hands of beneficiaries) through the aforesaid entities controlled by the assessee. (iv) The assessee did not maintain any books of accounts, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, M/s Orbit Buildcon & Realty Private Limited, M/s Orbit Constructions and Realtors Private Limited and M/s Orbit Shelters Private Limited, had failed to declare the additional income of Rs. 41,35,05,065/- disclosed during the course of search action u/s 132(1) by Mr Pujit Ravikiran Agarwal and hence additions to that effect were made by the AO in their hands vide assessment orders passed by the AO. It was observed by learned CIT(A), that in the case of Orbit group entities, learned CIT(A) upheld the additions on account of bogus purchases. The details of such appeals as decided by learned CIT(A) in the case of Orbit group are specified in page 12 of learned CIT(A) appellate order. The learned CIT(A) refers to similar type entities wherein addition of 2% commission was upheld by him from such illegal activities. The learned CIT(A), therefore, upheld the additions of commission to the income of the assessee to the tune of 2% of the value of bills issued as the basis for arriving at the net income, detailed as hereunder: F.Y. A.Y. Bills issued (In Rs.) Net Commission @2% (In Rs.) 2005-06 2006-07 3,16,45,356 6,32,907 2006-07 2007-08 20,55,91,983 41,11,839 2007-08 2008- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition of last three years i.e. AY 2007-08 to AY 2009-10, but while computing income the AO added the figures of last three years and not averaged which is not reasonable. It was observed by learned CIT(A) that the assessee has contended that the business was closed in 2008 itself and the bank account with Standard Chartered Bank was also closed in 2008 itself. The learned CIT(A) restricted disallowance to Rs. 10,00,000/- keeping in view facts and circumstances of the case. The learned CIT(A) observed that the assessee has raised a ground of appeal in AY 2009-10 pertaining to denial of F & O loss of Rs. 33,45,600/-. The learned CIT(A) observed that the assessee has not produced books of accounts, bank statements, transaction details and evidences as to verify genuineness of the loss. Thus, since the assessee did not discharged the onus, the said loss was not allowed by learned CIT(A). The learned CIT(A) did not allow the carried forward of loss of Rs. 30,83,557/- for AY 2010-11 as the assesee did not produced books of accounts, bank statements, transaction details and evidences so as to verify the genuineness of the said loss. Thus, since the assessee did not discharged the onus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... double additions while the learned CIT(A) has restricted addition to the income computed based on issuance of bogus bills.It was submitted that the AO applied rate of commission @1% while learned CIT(A) applied enhanced rate of commission @2%. It is submitted that income be computed based on realization of cheques after discounting with bank and not based on mere issuance of bills, as the income does not arise at the time of issuance of bogus bills but at time of receipt of cheque against bills. It was submitted that there was an independent search conducted by Revenue against Orbit Group u/s 132(1) of the 1961 Act.It is submitted that for AY 2004-05 and 2005-06, there was no bogus bills issued by the assessee as the business of providing accommodation entries started after the end of these relevant previous years.It was submitted that learned CIT(A) adopted income of commission @2% while the assessee only earned income @0.30-0.40% against bogus bills and also further benefit of relevant expenses incurred by the assessee should also be provided against said income.It was submitted that similarly no income can be brought to tax for AY 2009-10 and 2010-11 as business stood closed aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is brought to the notice of the Bench that the AO computed income @1% which was enhanced to 2% of the bogus bills by learned CIT(A). It is brought to the notice of the Bench that the AO aggregated both bogus bills issued plus the payments received while applying rate of commission @1%, while learned CIT(A) computed commission income @2% on bogus bills issued. Our attention was drawn by learned CIT-DR to the orders passed by the authorities below, which are placed in file. Our attention was also drawn by learned CIT DR to the orders of the tribunal wherein additions to the tune of 0.15% was upheld while further deduction of expenses to the tune of 50% was also allowed by the tribunal. The said orders find mentioned in preceding para's of this order. It is submitted that for the AY 2009-10 income is computed based on bogus bills to the tune of Rs. 5.93 crores which was found based on search u/s 132(1) on Orbit Group on 11-02-2010. It is submitted that income for AY 2004-05, 2006-07 and 2010-11 is estimated keeping in view evidence of business conducted by assessee and keeping in view non-coperative attitude of the assessee. It is also submitted that the appeals of the Revenue be all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and persons and several transaction of issuing sale bills without physical delivery of goods and cheque discounting activities are carried out through these concerns, entities and persons. The details of these benami concerns, entities and/or person found mentioned in the orders of authorities below, which are admittedly controlled and managed by the assessee. Thus, in nut shell these well planned and organized activities conducted by the assessee through a web of large number of benami concerns, entities and persons admittedly created, managed and controlled by the assessee as benamidar, is an organized scheme of activities undertaken by the assessee by series of accommodation transactions carried out through these web of large number of Benami concerns, entities and persons created, managed and controlled by the assessee as Benamidar with an objective to defraud Revenue, launder black money, wreck and destroy socio-economic fabric of the Indian Economy with a view to create an havoc in the Indian Economy by introduction and circulation of menace of black money in the system. These activities so claimed to be the normal business activity by the assessee which is infact laundering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t furnished by the assessee despite several opportunities granted to the assessee by authorities below. The claim of the assessee is that it is an organized business wherein benefit of all the expenses incurred in connection with the said organized business of providing bogus bills should be allowed as deduction from income as in the case of normal business which are permitted and allowed by provisions of Section 30 to 43D. The assessee did not furnish any details of transactions conducted by these concerns, entities and persons of whom the assessee is benamidar nor bank statements of these concerns, entities and persons were furnished. It is simply denied that no books of accounts were maintained by the assessee of all these benami concerns, entities and persons while only note book/diaries entries were maintained wherein on the left side of the note book/diaries is written as to the bill issued while on the right side it is written cheque realized against the said bill issued by the assessee, which note book/diaries stood impounded by Revenue on 13-12-2007 during the course of survey action u/s 133A. The AO worked out commission income @1% based on billing plus receipt as is refl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Revenue as no documents/details/ bank statements/ books of accounts etc were submitted by the assessee before the authorities below and thus it is clear that the assessee has not approached the Court with clean hands and it is well settled proposition of law that Courts will not help those who come to the Court with dirty hands. We have gone through all the tribunal orders relied upon by the assessee and we have observed that there are recent judicial developments which we are going to cite herineafter, and in midst of these judicial developments, these tribunal decisions so referred to by the assessee will not be applicable more-so keeping in view factual matrix of the appeals before us. Reference is drawn to a recent decision of Hon'ble Supreme Court in the case of Binoy Viswam v. UOI reported in (2017) 82 taxmann.com 211(SC), wherein Lordships have held in no uncertain terms that menace of the black money which is deep rooted in the economy need to be tackled by taking multiple actions at the same time, by holding as under : "99. Unearthing black money or checking money laundering is to be achieved to whatever extent possible. Various measures can be taken in this behalf. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he has not been able to explain the source of all the deposits in his accounts or the ultimate destination of all the outgo from his accounts. 16. The Assessee's plea that he should be taxed only on a composite 'peak credit' is based entirely on principles of accountancy. He questions the logic behind allowing peak credits for some of the credit entries by way of cheques and denying it for the other entries in cash. He also questions the practice of working out separate peak credits for cheque and cash transactions. 17. The premise underlying the concept of peak credit is the squaring up of the deposits in the account with the corresponding payments out of the account to the same person. In Bhaiyalal Shyam Bihari v. CIT (supra), the Allahabad High Court explained that benefit of peak can be given only when the assessee owns up all the cash credits in the books of accounts. It was further held: "For adjudicating upon the plea of peak credit the factual foundation has to be laid by the assessee. He has to own all cash credit entries in the books of account and only thereafter can the question of peak credit be raised." 18. In that case, it was held that as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... squaring them off. That is not permissible in law as explained by the Allahabad High Court in the aforementioned decisions which, this Court concurs with. Conclusion 21. As already noted, the ITAT went merely on the basis of accountancy, overlooking the settled legal position that peak credit is not applicable where deposits remain unexplained under Section 68 of the Act. The question of law framed by this Court, is accordingly, answered in the negative i.e. in favour of the Revenue and against the Assessee. The impugned order of ITAT is, accordingly, set aside and the order of the AO is restored to file." Reference is also drawn to the decision of Hon'ble Calcutta High Court in the case of Rajmandir Estates Private Limited v Pr. CIT (2016) 386 ITR 162(Cal. HC), wherein Lordships has discussed the concept of laundering of black money as follows: "In a commentary on the Prevention of Money Laundering Act, 2002 by Dr. M. C. Mehanathan published by Lexis Nexis, 2014, the steps of money laundering are described as follows:- "STEPS OF MONEY-LAUNDERING Although money-laundering often involves a complex series of transactions, it generally includes the following three bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undering the black money and laundering proceeds of crime are two different issues, although there is frequent overlap between the two. While laundering black money is to be handled through taxation laws or similar laws, the laundering of proceeds of crime is to be handled through special anti-moneylaundering laws." In the instant appeal's before us for the AY 2004-05 to 2010-11, the assessee has consciously and deliberately chosen the path of non co-operation with the authorities below, wherein no information was provided to the Revenue and the Revenue was left to determine and compute the income based on survey conducted on the assessee u/s 133A of the 1961 Act on 13-12-2007 as well search u/s 132(1) conducted on Orbit Group on 11-02-2010. The plea raised before learned CIT(A) of non adherence to principles of natural justice by the AO while framing assessment order, was a false plea as despite being granted opportunities by learned CIT(A) and AO in remand report proceedings, no information/documents were forthcoming from the assessee. Under these factual matrix of the case which we have discussed in preceding para's of this order, we are now deciding all these appeals with fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO to frame assessment and compute income as per provisions of the 1961 Act. In case of non-compliance of our directions, the learned CIT incharge is directed to take appropriate actions in accordance with law against assessee which follows as consequence from non compliance of tribunal orders. d) The assessee is directed to produce all books of accounts and other details/information concerning these benami concerns and persons through whom the assessee has admitted to have entered into benami transactions of which the assessee is benamidar including explaining sources of making investments in these concerns as own capital for doing these activities which the AO shall examine on merits and thereafter bring to tax the same if sources of investments in these concerns by the assessee are not properly/satisfactorily explained. e) The claim of the assessee to have earned commission income of 0.30-0.40% is a self confessed claim and we do not find any material/evidence on record which could have substantiated this claim of the assessee. The onus and burden of proof is on the assessee to substantiate such claim. f) The assessee is directed to produce evidences to substantiate rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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